According to the Commerce Department’s announcement on Thursday, the US economy experienced a slowdown in the first quarter of this year, raising concerns about the possibility of a mild recession as consumer spending weakens.
Consumer spending has been a driving force behind the world’s largest economy, providing a strong start to 2023. However, recent turbulence in the banking sector and rising interest rates are expected to impact the economic outlook negatively.
In the January to March period, US gross domestic product (GDP) increased at an annual rate of 1.1 percent, down from 2.6 percent in the fourth quarter of the previous year, Barrons reported.
The Commerce Department explained that the deceleration in real GDP during this period was primarily due to a decline in private inventory investment and a slowdown in nonresidential fixed investment.
However, this decline was partly offset by an increase in consumer spending and exports.
The department further stated that the GDP growth figure reflected positive contributions from consumer spending, exports, federal government spending, and certain forms of investment.
Economic activity has been dampened as the US central bank swiftly raised the benchmark lending rate to address persistent inflation concerns.
Additionally, the full impact of recent turmoil in the financial sector, following the failures of three mid-sized lenders last month, is yet to be fully observed.
Written by staff